martes, 1 de junio de 2010

How can be explained peer-to-peer processes, the growth of Wikipedia in comparison with the Britannica Encyclopedia or the growing importance of Linux in contrast to Windows. Even the success of Google can be hardly explained within the classic economic paradigm.

The classic economic paradigm was tailored for industrial economies. Production was explained as the result of a given combination of capital and labour. But, can this two productive factors explain the productive process of peer-to-peer, Wikipedia, Linux, Google? Certainly they can be used in explaining the productive behaviour of a car-factory, a textile-production or a small regular shop of any possible kind, but the explanatory power of that paradigm is much lower when facing the productive processes present in many of the new economic productive entities that have appeared after the disruptive development of information technologies.

What is different? Highways vs rural paths.How highways are produced can be easily explained in terms of the two single productive factors capital and labour. But is this explanation useful in explaining how a rural path is created? A rural path appears due to the repetitive use of a given route. The repetitive use of the route progressively eliminates vegetation establishing a marked track on the ground. If the path is not used enough, it just disappears. Obviously labour might have a role: a nearby village might reward a group of people to have some obstacles removed. Capital might also be relevant: a cliff might be avoided through the construction of a bridge. But the radical difference is that its production cannot be explained just through capital and labour. The production of a rural path could not possibly be explained without taking into account its mere use (consumption) as a productive factor.

Rural paths, P2P, Linux, Wikipedia and Google: why are they similar.The so called new information technologies are characterized by network-effects and network externalities, this is, "when the value of a product to one user depends on how many other users there are, economists say that this product exhibits network externalities, or network effects" (Shapiro and Varian 1998, p.13)1. This idea was originally related to the economic analysis of communication services, telephone and fax being the typical case studies2. Indeed the utility of having a telephone is zero if anybody else has one, and utility increases as more people is connected. Similarly, the utility of a rural path increases as more users are connected through it. The argument is also valid for virtual networks such as Google, P2P software users, Wikipedia or Britannica, Linux or Windows and so on.

There is however a subtle difference in how an extra user benefits the rest of the users in a telephone network or in a rural path:

"classic" network effect: like in the telephone network case, an extra user might benefit the rest of users of the rural path by expanding the network (so an extra user can be reached).

"peer-production effect": unlike the telephone case, this extra user collaborates with the maintenance/creation of the path by walking it.

Likewise a search in Google contributes to the production of Google´s searching engine3, reporting a mistake in Wikipedia improves it, reporting a bug in Linux helps debugging it, joining Bit-torrent network forces users to share files (at least those that are being downloaded4). Peer-production process are characterized by anti-rivalry (for a further analysis see), implying that even free-riders pose a positive effect on production (Raymond 2001, p.15, recasts the term free-riders into "outriders"), or more generally mere consumption entails a contribution to production, consumption becomes a productive factor.

"Peer-production effect": Consumption contribution to production as a comparative advantageWhile for a highway to be built capital and labour are strictly necessary, for a rural path it is not the case, users are instead essential. Similarly, for Microsoft and Britannica Encyclopedia to deliver a new version of their product, labour needs to be recruited and capital resources obtained. They both benefit from net-work effects, but there is no "peer-production effect", anti-rivalry is not present. Differently in Linux and Wikipedia case, labour and capital requirements are softened by its ability to use users´ contributions in production5.

A rural path and a highway serve the same purpose in different ways, so usually usually there is no competition and each has its niche. However in the case of an encyclopedia (Britannica vs Wikipedia) or an operative system (Windows vs Linux), there is indeed competence6. Open source and some platforms such as Google benefit from user´s contribution while most proprietary platforms don´t.

Does peer-production pose a comparative advantage?

Could this explain the success of open platforms?

...............................

Notes

More literature on the topic is provided by Varian, Farrel and Shapiro (2004, p.35-36). See Liebowitz and Margolis (1994) for some critical views.

See Rohlfs (1974) for an early approach.

See Benkler (2006, p.33), for instance.

See Strumpf and Oberholzer-Gee (2010, p.10) for instance.

Economides and Katsamakas find in "The Economics of Open Source Software Development" (2006) the conditions for which investment in open platforms (Windows vs Linux) is greater than in propietary platforms.

See Bitzerand and Schröder (2006) in "The Economics of Open Source Software Development" (2006) , for instance.

lunes, 19 de abril de 2010

"Unlocking Knowledge, Empowering Minds"This is the lemma of the OpenCourseWare, or OCW, an initiative pioneered by the MIT University to provide access to university educational contents for free and ubiquitously. The project started modestly in 2002 with 50 courses published online. Now the OpenCourseWare Consortium entails hundreds of universities from all around the world, giving free access to thousands of courses´ material in different languages, English being this the main one, while Spanish is scaling up.

There is a monthly seminar on the topic organized by the eMadrid net, a project for the promotion of Technology-Enhanced Learning publicly funded (Comunidad de Madrid).This time it took place at theEscuela de Organización Industrial (EOI) whose strategic plan has been partially inspired by the OCW project. As Tíscar Lara (vice-dean of Digital Culture at the EOI) said, stating her support for public, free (not for free) and open education. And in consequence her support for tools, contents and methods open as well (see Whyfloss).

Stephen Carson presentation was focused on the impact of OCW. Originally from the three functions universities have -provision of content, learning/social experience and certification- the aim of the OCW initiative was only focused on making content accessible so educators could incorporate the MIT teaching materials. Surprisingly from the use of OCW, educators represent only a 9%, and from this percentage those incorporating material to their teaching is a minority (14%): educators use it mostly to improve their knowledge and teaching methods. Against the original expectations self-learning represents the principal use: from all the users 43% are self-learners (not involved in official/institutional learning), and from these percentage, 41% use it for personal enjoyment. Furthermore, from the students using OCW contents, 44% are self-learners, the rest use it for completing (39%) and for planning their course of study (12%). Stephen Carson announced that given these unexpected success there are future plans to improve contents in order to make them more suitable for independent learners.

In open initiatives there is usually a stress on the distinction between “`free´ as in `free speech´, not as in `free beer´": in this case the distinction is unnecessary, it means both. Being free underlies both its success and some of the problematics of its future: since OCW is offered for free it is largely dependant on donors. Even though that it is free, OCW benefits not only users but content providers. For Stephen these benefits include publicity, reputation, international engagement, collaborations, connection to students... From a financial perspective these benefits are translated in donations to the OCW project, greater recruitment for the universities and potential collaborations with funding institutions thanks to the publicity and reputation that the visibility of professors and universities engaged in the project implies. Besides, the success of the OCW has resulted in an increasing governmental support, specially from the Obama administration. However as the NewYorkTimes puts it "Still, someone must pay for these materials, and with the recession squeezing university budgets, open course programs are vulnerable".

Edmundo Tovar and Jesús Jara (UPM)´s presentation was focused on their own experience rather than on the OCW users experience, an indication (in my personal view) of the very early stage of the project in Spain (in the UPM it started in the 2006). Even though the UNED project started later (2007) the views of Salvador Ros were focused on the user perception and perspectives of the future of education. UNED is the national university for distance learning and offering virtual access to educational resources is not a disruptive shift of the educational paradigm, it is as Salvador said their "natural environment".

Salvador agreed with the audience that openness is rather than an economic problem a problem of mentality. Most of the contents taught at university are universal, there is no sense in using an appropriation scheme of the educational resources: changes are necessary and inmobilism is not a good policy. Aware that changes are costly Salvador pointed out that more students accessing the resources imply that providing them is -potentially- increasingly cheaper.In many Spanish/Portuguese speaking universities Universia, a foundation of the Santander Group for the promotion of university education (in Portuguese and Spanish), sponsors many OCW projects (included UPM and UNED). Nevertheless funding is limited and expansion of OCW projects is constrained and dependant on the donor.

The original aim of the OCW was providing content, and Salvador wondered if the time has come to expand its functionality to social/learning experience and accreditation provision. Social nets like Facebook or Twitter could provide the former, it is only accreditation provision which remains out of the scope, Salvador argued. For both workers and employers knowledge is usually not enough, educational accreditation is used as a signal of expected/desired capabilities. Universities are not just educational centers, providing content and learning experience, they are also "credentialing agencies". This was one of the central points of Salvador presentation: access is not enough, for the student, credit is usually a must. In this sense, the data presented by Stephen showing that, unexpectedly self-learners are the main users of OCW, could be an indication that OCW might not meet the needs of other users.

A solution for the economic problem of open education was offered by David Wiley in OpenCourseWars, his contribution to the book "Opening Up Education" (via: P2PFoundation). David Wiley addressed the sustainability of the OCW project and the proposed solution bridges the two claims of Salvador Ros, the economic issue and the accreditation needs of users. Charging for accreditation could solve the financial dependence on the donors making OCW self-sustainable:

“The first generation of OpenCourseWare projects (”OCW 1.0?) had essentially no sustainability plan. These first generation projects were funded by grants and had no means of supporting themselves once the grants ran out (...). A new generation of OpenCourseWare projects are built around sustainability plans. These second generation projects are integrated with distance education offerings, where the public can use and reuse course materials for free (just like first generation OCWs) with the added option of paying to take the courses online for credit (there is no way to earn credit from the first generation OCWs)."

"Today, much of the value derived from the learning marketplace is based on an artificially imposed scarcity – a scarcity of seats in classrooms, a scarcity of credentialing agencies, and a scarcity of educational publications, for example. These scarcities will disappear as governments prefer to fund education directly, and at cost, rather than support such business models."

Similarly to the former Salvador declared that "closed educational platforms are about to disappear, technology will overcome them". Unfortunatedly these coming changes will certainly face opposition, and interests different than access to knowledge might be dominant threatening the project. Salvador pointed to the recent publication by the Spanish Ministry of Culture of the inform "The Electronic Book", which has been broadly criticized (see for instance). The book encourages property right administration organizations to enforce property rights remuneration upon works even if these have been licenced under copyleft or creative commons licenses (for a more detailed analysis):

But exclusion is still present: Wikipedia, one of the mayor successes of peer-to-peer collaborative projects has included exclusionary policies, as Benkler (2006) already ascertained,

"(...) even Wikipedia includes, ultimately, a small number of people with system administrator privileges who can eliminate accounts or block users in the event that someone is being genuinely obstructionist. This technical fallback, however, appears only after substantial play has been given to self-policing by participants, and to informal and quasi-formal community based dispute resolution mechanisms." (p. 104).

And it is expanding: The expansion of exclusion in Wikipedia is what Bongwon Suh, Gregorio Convertino, Ed H. Chi, Peter Pirolli (2009)1, from the Palo Alto Research Center have found (they have an extremely recommended blog). They find what seems to be "evidence of growing resistance from the Wikipedia community to new content, especially when the edits come from occasional editors." (sc.5.3). This happens at the same time that Wikipedia growth rates have for first time started to decrease.

Source: Suh et al. (2009).

Is this slowdown due to the reducing number of contributors? or has the Wikipedia covered such an amount of information that it is increasingly difficult writing new articles?

Suh et al. (2009, 5.1.) argue that "(...) the population of Wikipedia editors is exhibiting a slowdown in its growth due to limited opportunities to make novel contributions." Indeed once an article has been written it might be improved, updated, rearranged, but it does not make much sense to write it again. As the article is improved there is less and less room for improvements. More individuals contributing to the same article result in decreasing marginal contributions and increasing overhead costs (see Suh et al., 2009, sc.6). This is interestingly similar to rivalry. As Benkler (2002, supra note 16) points out "While the reference to information as a public good is common, the reference to culture is not." Wikipedia´s articles are an embodiment of knowledge and culture around a specific topic and "Obviously, embodiments of culture, like a specific statue or building, are no more nonrival than embodiments of any other form of information, like a book or a corkscrew."

Wikipedia is then an antirival process but its product might become rival.

As the articles become rival, the condition for antirivalry production becomes more relevant: the rate of contributors over free riders increases, until there is no antirivalry any more.

"(...) article growth reached a peak in 2007-2008 and has been on the decline since then [Figure 5]. This result is consistent with a growth processes that hits a constraint – for instance, due to resource limitations in biological systems. Microbes grown in culture will eventually stop duplicating when nutrients run out."

Total percentage of edits reverted are on the y-axis, the figure (11) shows how the "disparity of treatment of new edits from editors of different classes has been widening steadily over the years at the expense of low-frequency editors. [1-9 edits per month]".

Source: Suh et al. (2009).

Knowledge requirements to make contributions becomes increasingly demanding and by analogy to Darwin, Suh et al. (2009, p.1) suggest that "(...) growth becomes increasingly constrained and limited, and under those conditions there will be increased evidence of competition and dominance."

This problematic poses a threat on the project,

"If a project cannot defend itself from incompetent or malicious contributions and integrate the competent modules into a finished product at sufficiently low cost, integration will either fail or the integrator will be forced to appropriate the residual value of the common project—usually leading to a dissipation of the motivations to contribute ex ante." Benkler (2002, 379)

However antirivalry might remain at three different levels of the process: first, new "events in the world (...) create new possibilities for write-up"; second, in the creation of new rules "a greater proportion of the overall edits is being devoted to overhead activities such as coordination, policy setting, and governance", these are also contributions to the growth of Wikipedia: it creates the coordination mechanism. Third and last, any contribution has a signalling effect pointing to deficiencies, needs of new topics to be covered, or non-solved conflicts.

The issue is relevant because differently from Suh et al. (2009), the objective here is not technological singularity, the objective here is how the shift in the growth pattern affects the idea of Wikipedia as a peer-to-peer production process.

And what is the importance of antirivalry? Can there be equipotency in the presence of exclusion?

Non-rivalry is a necessary condition for equipotency, but it is not a sufficient condition. Antirivalry implies that any agent by the mere consumption of the peer-produced goods is also collaborating in its production. Thereby antirivalry is a sufficient condition for equipotency.

"Call it a network good, or antirival good (an akward, but nicely descriptive term). In simpler language, it means that the value of a piece of software to any user increases as more people use the software on their machines and particular settings. Compatibility on the standard sense of a network good is one of thee reasons why this is so."

Interestingly this implies that for any user, either contributor either free rider the mere use implies a contribution:

"The point is that open source software is not simply a nonrival good in the sense that it can tolerate free riding without reducing the stock of the good contributors. It is actually antirival in the sense that the system as a whole positively benefits from free riders."

There are of course limits to this, "This arguments hold only if there are a sufficient number of individuals who do not free ride (...)". Thereby in as much as there is a sufficient number of contributors free riding results in a positive effect.

The technological revolution has lowered the transaction costs of cooperation enabling new forms of production of the "Networked Information Economy" (B. 2006, p.106-116) such as P2P. Peer-to-peer is based on collaboration, on the capacity of its architecture to allow cooperation, to integrate and aggregate rather than exclude, it is inclusive rather than exclusive (B. 2006, p.99-116).

"Cooperation in peer-production processes is usually maintained by some combination of technical architecture, social norms, legal rules, and a technically backed hierarchy that is validated by social norms." (B.06,p.104).

Beyond the “Tragedy of the Commons”

Antirivalry has changed the problems that free-riding used to pose on commons enterprises. Free riding is usually considered as a drawback in collective action (Olson 1965 and Hardin 1968). Both Olson´s conjecture and Hardin's classic "Tragedy of the Commons" come to say that, paradoxically collective action hinders the consecution of collective aims. Olson (1968) conjecture establishes a negative relationship between group size and the ability to obtain collective goods due to free-riding. These however does not hold in the presence of antirivalry, contrary it happens the other way around, size becomes a positive factor in obtaining the collective good.

"The key concepts of the argument -user-driven innovation takes place in a parallel distributed setting, distinct forms and mechanisms of cooperative behaviour regulated by norms and governance structures, and the economic logic of `antirival´ goods that recast the `problem´ of free riding -are generic enough to suggest that software is not the only place where the open source process could flourish" (Weber 2004, p. 225)

Krishnan et al (2004) argue that free-riding does not undermine P2P processes, "free riding is sustainable in equilibrium and in some cases occurs as part of the socially optimal outcome". The architecture of P2P processes seems to be so that even free-riders might make a "passive" contribution. In "The Cathedraal and the Bazaar" E. S. Raymond recasts the term of free-riders into"outriders":

"Even at a higher level of design, it can be very valuable to have lots of co-developers random-walking through the design space near your product. Consider the way a puddle of water finds a drain, or better yet how ants find food: exploration essentially by diffusion, followed by exploitation mediated by a scalable communication mechanism. This works very well; as with Harry Hochheiser and me, one of your outriders may well find a huge win nearby that you were just a little too close-focused to see." (Raymond, 2000; p.15).

The condition for this to be so is that there must be a sufficient number of contributors (non-free riders). Benkler (2002, section III,A) lists reasons why there will always be a share of users that behave altruistically. Moreover, there might be non-altruistic reasons that might push users to contribute,

"(...) sharing could reduce congestion on these networks, which may increase an individual peer’s utility of using the network — providing a rationale for sharing even in the absence of `altruism.´”(Krishnan et al 2004, p.5).

P2P architecture might force users to "passively contribute" as in file-sharing services such as Bit Torrent which "(...) forces users to share the parts of files that they already own while they download the remaining bits" (Strumpf, K and Oberholzer-Gee, 2009, p.10).

In a setting where antirivalry is present free riders make a positive contribution, hence exclusion would have a negative role limiting access and reducing production. There would be then a positive relationship between group size and production of the common good. The set of social norms, legal rules and technical architecture that allows for cooperation in peer-production processes seems to result in a setting which can be characterized by antirivalry. In such a setting, where even free riders contribute to the production of the common good, it is inclusion rather than exclusion the most reasonable policy.

jueves, 13 de agosto de 2009

Maghribi traders organization system is similar to current P2P processes, maybe similar enough to consider them P2P pioneers (Maghribis I). However Maghribis suffered from intrinsic disadvantages that deterred their expansion and success (Maghribis II). Maghribis succumbed to history while Genoese, a proto-capitalist society survived stabilising the foundational stones of capitalism.

Maghribi traders organizational system had intrinsic disadvantages that deterred its expansion and success.

How far is this applicable to current P2P?

Lets see first which are the fundamental differences between the Maghribis and "modern" P2P.

In comparing Maghribis organization with P2P (Magribis I) there was only one slight divergence: equipotency, one of the three characteristic of P2P listed by Michel Bauwens. Equipotency´s definition required that "there are no formal rules to prohibit anyone from participation". In defence of the hypothesis of Maghiribis traders as a P2P-pioneers it was argued that most "known P2P-systems also ban/block certain users due to their anti-cooperative behaviour" posing Wikipedia as an example.

It was however exclusion what undermined Maghribis possibilities of expansion, it was this closure what inhibit the model to expand beyond its ethnical-cultural group. It was also this exclusion what allowed the reputation model that in turn enabled the whole system to be comparable with a P2P. Hence exclusion of non-trustable members is the cornerstone of the architecture of the Maghribis organizational system.

The "principle of exclusion" is also present in P2P:

"This necessity for cooperation requires peer-production processes to adopt more engaged strategies for assuring that everyone who participates is doing so in good faith, competently, and in ways that do not undermine the whole, and weeding out those would-be participants who are not." (Benkler 2006,p.13-14).

"Standard" P2P also shows a strong dependence on the architecture that enables cooperation:

"Cooperation in peer-production processes is usually maintained by some combination of technical architecture, social norms, legal rules, and a technically backed hierarchy that is validated by social norms." (B.06,p.104).

Nevertheless it can be argued that even though the principle of exclusion is also present in standard P2P processes, it is of a different nature and it is definitively not its cornerstone. P2P as we know it is based on the capacity of its architecture to allow cooperation, to integrate and aggregate rather that exclude. It is openness rather than exclusion what makes it different. The relative difficulty to undermine its process does not depend on trust or punishment, It depends on the ability of the architecture to organize, filter and engage individuals into cooperation rather than on its power of punishment, or on the power to exclude.

Greif (1994) argues that cultural beliefs are the essence of the difference between Maghribis and Genoese. Differently in the case of P2P vs. industrial production, the argument is usually technological, it does not belong to the realm of the belief but to the material world:

"We need to assume no fundamental change in the nature of humanity; we need not declare the end of economics as we know it. We merely need to see that the material conditions of production in the networked information economy have changed in ways that increase the relative salience of social sharing and exchange as a modality of economic production." (B.06;p.94).

A broad capacitation of individuals is what enables them for cooperation,

"The declining price of computation, communication, and storage have, as a practical matter, placed the material means of information and cultural production in the hands of a significant fraction of the world's population" (B.06;p.4).

Necessarily Maghribis also needed to be able to cooperate, to posses the material means that capacitate them. Shipping technological development facilitated trade, "shipping was available even to a small merchant, who could rent storage space on a ship" (G.89, p.860) providing the technical capacitation needed for cooperation. Despite technical capacitation is obviously a necessary condition it was not technical capability but cultural beliefs as Greif (1994) defends the responsible of the Maghribis organizational system.

In the context of the expansion of the commercial revolution"Maghribis could not overcome the intrinsic limitations that the architecture of their net imposed." Exclusion imposed costs that inhibit their expansion and facilitated their disappearance, "we have to take into account the costs involved in operating the various social arrangements (...), as well as the costs involved in moving to a new system." (Coase1969, p.23).Maghribis cultural beliefs could not deal with material limitations.

The digital revolution has radically altered the "material conditions of production": while P2P is a result of technology, Maghribis organization is based on beliefs. Maghribis´ system is rooted, enabled and limited by exclusion, on the contrary, P2P is based on integration and aggregation. There are underlying fundamental differences in the organizational architecture of "current" P2P processes and Maghribis trading system. In as much P2P architecture is based on integration rather than on exclusion, it will not depend on beliefs but on technology and Maghribis´ limitations won't apply to P2P. If the architecture reaches its limits (if there are) and no further integration/aggregation is feasible, cooperation will be sustained by beliefs (instead of technology), there will be exclusion (at least what can not be integrated) and Maghribis´limitations might apply.

Is it possible still to argue that Maghribis where P2P pioneers?

Are they just another form of collectivism with no particular relationship with the present beyond that it is collectivist? I don´t think so. Some of the definitory features of P2P are common to the Maghribis as it has been argued. Individualism and collectivism were simbiotic, like it happens now in peer processes, as M. Bauwens argues,

"(...) this turn to the collective that the emergence of peer to peer represent does not in any way present a loss of individuality, even of individualism. Rather it ‘transcends and includes’ individualism and collectivism in a new unity, which I would like to call ‘cooperative individualism’."

Maghribis system fits into Benkler definition of common-based peer production,

"(...) the networked environment makes possible a new modality of organizing production: radically decentralized, collaborative, and nonproprietary; based on sharing resources and outputs among widely distributed, loosely connected individuals who cooperate with each other without relying on either market signals or managerial commands." (B.06, p.60).

It is when other definitions are used that the claim weakens. There is only equipotency among Maghribis, non-Maghribis are excluded. But Equipotency, as defined by M. Bauwens, even when it might not be universal must aim at universality:

"(...) everyone can potentially cooperate in a project, that no authority can pre-judge the ability to cooperate, but that the quality of cooperation is then judged by the community of peers, i.e. through Communal Validation. In equipotential projects, participants self-select themselves to the module to which they feel able to contribute."

Lets call this definition of the term that entails universality strict-equipotency. If strict-equipotency is a necessary condition for being considered a P2P process, hence Maghribis are not. If non-strict-equipotency (no universality) is fine then they are.

sábado, 1 de agosto de 2009

There is a tendency to believe peer production to be a better system. Fine with that, the point now is whether it is sustainable or not.

As it was argued in the previous post there is at least ground for considering fundamental similarities between our understanding of P2P and the medieval Maghrebis traders´ system. However Maghribis traders succumbed to history meanwhile Genoese survived, created some of the first banks and shares and thereby established the foundational stones of capitalism.

If P2P system is superior/preferable why did it not succeed?

-------------------

Lets see first what where the fundamental similarities and differences between Genoeses and Maghribis.

"Genuensis ergo mercator" (Genoese, therefore merchant), says an old proverb. Effectively, large-scale long-distance overseas trade was central not only to Maghribis but to Genoa. Both the Maghribis and the Genoese began trading in the Mediterranean in the eleventh century and in similar conditions:

"The Maghribis and the Genoese faced a similar environment, employed comparable naval technology, and traded in similar goods." (Greif 1994, p.917)

They both faced a similar organizational problem: in order to organize overseas trade, agents are needed abroad to handle the merchandise, but without proper institutions to supervise them reliance in their honesty (asymmetric information) was problematic.

So far these are all similarities, where are the differences?

As it was previously argued the Maghribis were an ethnical/cultural group (coalition) conforming a net of equipotent members -peers- where cooperation of equals was granted. This coalition solved the organizational problem of overseas trade through a reputation-mechanism: free information flows from and through any peer enabling identification of cheating members which are punished with the exclusion of the net. Hence there was a stable system based on trust in which trust was enabled by access to information and exclusion of non-trustable members.

In contrast to this cooperative system with an open approach towards information as a communal good,

"(...) the Genoeseseem to have held an opposite attitude regarding information sharing. Lopez (1943) noted the efforts of the Genoese to conceal information and conjectured that the `individualistic, taciturn, and reserved Genoese´ were not `talkative´ about their businesses and were even `jealous of their business secrets´ (p. 168)". (G.94, p. 924)

Maghribis behaved as a common-based peer production,

"(...) the networked environment makes possible a new modality of organizing production: radically decentralized, collaborative, and nonproprietary; based on sharing resources and outputs among widely distributed, loosely connected individuals who cooperate with each other without relying on either market signals or managerial commands." (Benkler 2006, p.60)

While for Genoese private property is at the core of their organizational system,

"The core characteristic of property as the institutional foundation of markets is that the allocation of power to decide how a resource will be used is systematically and drastically asymmetric. That asymmetry permits the existence of `an owner´". (B.06, p.61).

This divergence is also reflected on the predominant contractual forms in each group. While Genoese "(...) mainly used commenda contracts, which were, by and large, established between two partiesone providing capital and the other providing work in the form of travelling and transacting overseas." Maghribis"(...) used mainly partnership and `formal friendship´. In a partnership, two or more traders invested capital and labor in a joint venture and shared the profit in proportion to their capital investment. In a formal friendship´, two traders who operated in different trade centers provided each other with agency services without receiving pecuniary compensation (Goitein 1967, p. 214 ff.; Stillman 1970; Gil 1983b, 1:200 ff.)." (G.94, p.928)

Different contractual forms shaped differently each society. Maghribis were a "homogeneous group of middle-class traders" (G.89, p.865), a horizontal net of equipotent peers being any peer both an agent and a merchant. "In contrast, agency relations among the Genoese traders were vertical. Wealthy merchants who rarely, if ever, functioned as agents hired relatively poor agents who rarely, if ever, functioned as merchants (De Roover 1965, p. 51 ff.). Byrne (1916, p. 159) concluded that during the late twelfth century, `as a rule´ the Genoese agents were `not men of great wealth or of high position.´" (G.94, p.928).

Genoese traders are not equipotent at all: either agent (low wealth and social status) either merchant (wealthy and high status), information does not flow (secrecy is predominant) and there is rather competition than cooperation. Genoese's organizational system is basically the opposite of Maghribis.

What is the underlying cause of this divergence? Greif (1994) points to cultural beliefs as the radical difference between both of the groups. But how can a "bunch" of beliefs account for such a divergent differentiation?

While the Maghribis had a collectivist tradition the Genoese were individualist:

"(...) Christianity during that period placed the individual rather than his social group at the center of its theology. It advanced the creation of `a new society based not on the family but on the individual, whose salvation, like his original loss of innocence, was personal and private´ (Hughes 1974, p. 61)." (G.94, p.923)

The eleventh century witnesses a spectacular rise in commerce, it is the preliminary stage of the commercial revolution. It is in this context that Genoa explosively develops as one of the main trading Mediterranean ports. This explosive economic growth attracted immigration. Information acquisition and transmission was costly in the middle ages and incentives and mechanisms are needed for information to be shared. As Benkler (2006, p.100) points out, "core inputs of information production ubiquitously distributed in society is a core enabling fact, but it alone cannot assure that social production will become economically significant."

This is in fact the case,

"If the (...) individual can satisfy his need through self-sufficiency, or through aid from some official source without incurring an obligation, he will do so-and thus fail to add to the social capital outstanding in the community." Coleman (1988, P.S117).

In this context of explosive commercial and economic growth with neither previous structures nor incentives for information sharing an individualist scheme triumphed over more communal alternatives.

"Instead of a few dozen traders who had previously been active in each trade center abroad, hundreds of Genoese began trading. At the same time, Genoa experienced a high level of immigration. For instance, Genoa's population increased from 30,000 to 100,000 between 1200 and 1300.In the absence of appropriate social networks for information transmission, the individualist equilibrium was likely to be selected. Once it was selected, individualist cultural beliefs discouraged investment in information. In the absence of a coordinating mechanism, a switch to a collectivist equilibrium was not likely to occur". (G.94, p.924).

In the other hand, Maghribis´ reputation mechanism was based on trust, information access and exclusion. In a context of explosive growth and overseas commercial expansion the conditions for trust and reputation mechanisms are difficult to be achieved. Different cultural beliefs (collectivist/individualistic), accelerated growth and trade expansion yielded the completely opposite solutions to the common organizational problem of overseas trade.

Trade expansion and transaction costs: the rise of Genoa and the decline of the Magharebis

"Commercially, both groups responded similarly and expanded their trade from Spain to Constantinople. From the perspective of societal organization, however, their responses differed. The Genoese responded in an `integrated´ manner, but the Maghribis responded in a `segregated´ manner. The Maghribis expanded their trade employing other Maghribis as agents." (G.94, p.930).

This difference -integrated/segregated- proved to be fundamental. In order for the Maghribis to maintain their organizational system trust was required. Trust was achieved by establishing commercial relations only within the net, while the Genoese could hire anyone as agent. Genoese were more able than Magherebis in expanding their commercial net.

"As trade with more remote trade centers became possible, a merchant could either hire an agent from his own economy who would sail or emigrate abroad, or hire an agent native to the other trade center. Such intereconomy agency relations are likely to be more efficient than intraeconomy agency relations since they enhance commercial flexibility, and a native agent does not need to immigrate and is likely to possess a better knowledge of local conditions." (G.94, p.931)

Maghribis system radically depended on trust and this one on exclusion. Segregation was the result, and segregation proved to be a constraint for their expansion: the costs of expanding their net would have outweighed the benefits. Benkler (2006, p.59) points out that "Industrial organization literature provides a prominent place for the transaction costs view of markets and firms". This is here the case: expanding Maghribis´ net reported excessive increases of transaction costs, so far that they could not expand the net. The opposite happened with the Genoese: since trust was not essential Genoese could capture the advantages of using native agents.

"(...) the primary reason to choose among proprietary and nonproprietary strategies, between marketbased systems—be they direct market exchange or firm-based hierarchical production—and social systems, are the comparative transaction costs of each, and the extent to which these transaction costs either outweigh the benefits of working through each system, or cause the system to distort the information it generates so as to systematically misallocate resources." (B.06, p.107).

The proprietary scheme of the Genoese was more able to expand than the communal approach of the Maghribis: Genoese had a comparative advantage in terms of transaction costs over the Magharibis.Maghribis could not overcome the intrinsic limitations that the architecture of their net imposed. When the net needed to be expanded the structure, the underlying architecture proved to be too rigid. The inability of the Maghribis to expand their net limited commercial expansion and prevented the survival of the model once trade was forbidden to the Maghribis.

"That this segregation is endogenous is reflected in the Maghribis' later history, when, toward the end of the twelfth century, they were forced by the ruler of Egypt to cease trading. At this point they integrated with the Jewish communities and vanished from the stage of history." (G.94, p.930)

Even though it can not be ascertained that the disappearance of the Maghribis´ system was due to intrinsic limitations it is however clear that they had strong intrinsic constraints and disadvantages in the context of trade expansion while the Genoese system did not.

Saint George Palace (Genoa)

How far can this be applied to "modern" P2P?

The underlying architecture of Maghribis´P2P organizational system had intrinsic disadvantages that prevented its expansion while proto-capitalism appeared, expanded and became the dominant system.

Will a similar story happen all over again? Is P2P architecture different?